Geithner to Meet German, Italian Officials Ahead of Summit

Dec. 2 (Bloomberg) -- U.S. Treasury Secretary Timothy F.
Geithner will travel to Europe next week for meetings with
political leaders and central bankers as they prepare for a
summit on the continent’s worsening debt crisis.

Geithner will meet French President Nicolas Sarkozy,
Italian Prime Minister Mario Monti and European Central Bank
President Mario Draghi during his Dec. 6-8 trip, the Treasury
Department said in a statement today. He will return to
Washington before the Dec. 9 summit in Brussels.

The Treasury secretary will hold “discussions with his
counterparts on their efforts to reinforce the institutions of
the euro area,” the Treasury said.

Geithner has been pressing European leaders to take
stronger action to stem the crisis, which has seen bailouts of
Greece, Ireland and Portugal and now threatens to engulf Italy
and Spain. Officials from the Treasury and the Federal Reserve
have said Europe also poses a risk to the U.S. recovery.

“It’s Europe’s crisis,” Geithner said Nov. 15.
“Fundamentally, the resolution of this is going to depend on
the choices they make going forward. And we hope they make some
progress more quickly.”

ECB’s Draghi

Geithner will meet Dec. 6 in Frankfurt with Draghi and
Bundesbank President Jens Weidmann. Later that day, he will talk
with German Finance Minister Wolfgang Schaeuble in Berlin.

The next day, he will meet in Paris with Sarkozy and French
Finance Minister Francois Baroin before traveling to Marseille
for discussions with Spain’s prime minister-elect, Mariano
Rajoy, “who will be in France for other meetings,” the
Treasury said. Geithner will meet with Monti on Dec. 8 in Milan.

“It seems useful for the secretary to continue to press
European policymakers to take decisive action, though it’s not
clear they are ready to listen to his advice,” said Phillip
Swagel, who was an assistant secretary for economic policy in
the George W. Bush administration.

A European proposal to channel central bank loans through
the International Monetary Fund may deliver as much as 200
billion euros ($270 billion) to fight the debt crisis, two
people familiar with the negotiations said.

At a Nov. 29 meeting attended by Draghi, euro-area finance
ministers gave the go-ahead for work on the plan, said the
people, who declined to be named because the talks are at an
early stage. The need for a new crisis-containment tool emerged
as the effort to boost the 440 billion-euro rescue fund to 1
trillion euros fell short.

Recycle Funds

Under the proposal, national central banks would recycle
funds through the IMF, potentially to underwrite precautionary
lending programs for Italy or Spain, the two countries judged to
be the most vulnerable now, the people said.

The euro area’s 17 national central banks operate under the
ECB’s umbrella. Draghi yesterday hinted at a stepped-up crisis-fighting role as long as governments move toward a “fiscal
compact” that ensures healthy public finances.

German Chancellor Angela Merkel laid out elements of that
strategy today, calling for European treaty amendments to create
automatic, court-enforced sanctions on countries that overstep
limits of 3 percent of gross domestic product on deficits and 60
percent of gross domestic product on debt.